Experience with Revenue Recognition

Topics: Generally Accepted Accounting Principles, Intangible asset, Income Pages: 3 (881 words) Published: August 26, 2012
#1-E) Experience with Revenue Recognition---

Do you have any experience related to revenue recognition? Surely, I do

#2-Please read the financial statement analysis case (Merck & Johnson & Johnson) on page 613, Chapter 12. Please read the instructions for (a), (b), and (c) and address the three questions that are asked. Case Merck & Johnson & Johnson are two leaders producers of health care products.  Each has considerable assets, and each expends considerable funds each year toward the development of new products.  The development of a new health care product is often very expensive, and risky, New products frequently must undergo considerable testing before approval for distribution to the public.  For example, it took Johnson & Johnson 4 years  and $200 million to develop its 1 Day ACUVUE contact lenses.  Below are some basic data complied from the financial statements of these two companies.           All dollars in million        Johnson & Johnson       Merck               Total assets                      $53,317                    $42,573               Total Revenue                    47,348                       22,939               Net Income                          8,509                          5,813 Research and development

expenses                                           5,203                          4,010              Intangible assets                11,842                          2,765 Instructions
A) What kind of intangible assets might a health care products company have? Does the composition of these intangibles matter to investors-that is, would it be perceived differently if all of Merck’s intangibles were goodwill, than if all of its intangibles were patents?

A health care company is a business enterprise with tangible assets such as land, land improvements, buildings, and equipment. It also has many intangible assets. Some of the most important intangibles are its physician referral networks, contracts with hospitals,...
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